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Have Your Heard That Home Prices Already Stabilized? Distressed Properties Are Distracting Us

With stories about real estate trends in the U.S. headed in every direction, it’s difficult to get a good feel for where we are in terms of a recovery. Headlines about sinking distressed home prices certainly receive attention but, in their simplicity, they fail to capture the overall market and its complex mix of properties. For the average home buyer or seller, the condition of the real estate in their specific market is what they truly need to know–not just in locale, but also in property type.

The most significant statistics in real estate sales right now are those of non-distressed home sales. Prices of traditional resale homes (those that make up the majority of the market and are likely what an average American homeowner intends to purchase) have stabilized over the past year. We’ve seen minor fluctuations in prices throughout the year, but the general fact across the U.S. is that if you’re buying or selling a traditional home, we are already in a flat market with increasing sales numbers.

Barclays Capital analyst Stephen Kim supports the idea of a recovery in the non-distressed market. “In the absence of a government home buyer incentives, prices for non-distressed home sales have stabilized for almost a year,” Kim said. “This is the most important trend in the housing industry right now, and we are amazed at how little attention it has been getting from the media and the street. This stability on the part of nondistressed prices has occurred despite a very high share of distressed activity and continued declines in overall prices.”

Home prices have stabilized in the market you’re intending to buy or sell.

If you’re a traditional home buyer or seller, this is already true. We’ve seen the effect in Greater Seattle, with King County numbers showing a wide divergence between foreclosures and short sales, and the majority of sales with are non-distressed. Most of the recent headlines have pointed to the 11% year-over-year loss in median values, but this is skewed inordinately by the 18% price drop in bank-owned homes. Non-distressed Seattle homes, on the other hand, have decreased only 2.5%, and that number has bounced around near zero for quite some time now.

Even more striking, there were droves of new sales in November, netting huge increases over 2010′s sales. King County recorded 41% more sales of houses this November than in the same month last year, according to the Washington Center for Real Estate Research at WSU. Condo sales were even stronger, with a 70% increase over the previous year. Total inventories of homes for sale are down significantly year-over-year, meaning that homes that are on the market today are much more likely to sell than they were one year ago.

Shrinking inventory, increasing sales, and stability of prices in the non-distressed market point to a recovery in this sector

This isn’t to say that we shouldn’t be aware of the distressed property issues. They will certainly be an important component in the market and will take a few years to flush out of the system. However, the leading edge of real estate price recovery will come from traditional home sales. Investors will continue to scoop up cheap distressed properties and rehab them at a lower cost. Average home buyers, on the other hand, have decided that prices for traditional homes are favorable, and combined with the affordability of homes with the current low interest rates, they’re buying in at reasonable prices.

As an average home buyer or seller, this specific sector of the market should be your focus. As we always say in real estate, “Location, Location, Location”. Don’t be distracted by flashy headlines that have little effect on your current situation. If your location is in the traditional, non-distressed home market, we’ve hit that flat market that you’ve been waiting for.